lecture seven, development

last week was about 'state capacity'

readings stressed two points

1. not the fact of State intervention that explains development, but the quality of State intervention.
2. well then what explains quality of State intervention? answer of that literature was State capacity?

that raises the question—well, why doesn't every State have State capacity? that literature has no answer.

Vivek's book tries to answer that question. in that sense it's adding 'causal depth'. in that sense carrying forward institutionalist literature

but the book is also making a theoretical point, that distinguishes it from their work. for the institutionalists, the 'consensual' relationship between States and capitalists is central to the picture of State capacity, remember. each member has its part.

if that's the case, though, then it should be rational for capitalists to support State capacity. the only explanation for failure is problems with State elites—they're too corrupt, too prone to infighting, etc. you end up, then, with State-centrism, in the institutionalist narrative.

to the extent that societal actors are brought into the narrative, it is the landlords—maybe the absence of land reforms, etc.

what isn't contemplated in this literature is the possibility that the industrial bourgeoisie—the treasured partner—might have had something to do with the failure to generate a powerful State.

Vivek's book suggests that there are reasons that capitalists would oppose the developmental State, which have to do with its dual character--(1) States give subsidies, largesse; (2) States discipline

Evans sees cooperation in the first, but assumes it in the second. Vivek's point is that it's not wrong to see cooperation, but of a limited sort—capitalists are willing to cooperate with regard to subsidies, but prone to conflict with respect to the disciplinary aspect.

in Korea that conflict does not emerge, of course, whereas in India it does.

the question asked by Vivek's book is why this is the case—under what conditions it is rational for capitalists to accept/resist?

the ruling assumption in much of the literature – the retort – is that this doesn't matter, because the State was always too powerful.

you can't retort this theoretically, you can only disprove this empirically. which Vivek did—the capitalist class was big enough, in India (and they were larger, as measured by conventional indices, in Korea).

as a consequence of all this, of course, India ends up with an enfeebled capitalist class, that's not properly embedded in the capitalist class.

the last third of the book takes up the question of why the State doesn't reform itself.

was Korea's authoritarianism doing the work, here? on theoretical and empirical grounds, no?

- - -

LR? we are not trying to explain the divergent develoment paths, per se. we're trying to explain the differences in the institutional capacity of the State.

1. LR re: State capacity? perplexing for Vivek, because there wasn't much evidence of landed class intervention in the formation of the PC, etc. it was only industrial associations, industrial elites. it was as if the landed elites had just been pushed out of the political scene. having said this, it is plausible that landlords have reason to oppose State capacity. so Vivek wants to say that it has little to do with installation of State capacity, but the fact of there not having been Land does have something to do with the actual working of the State apparatus. State w/ more equality would have an easier time disciplining capital—planning in capitalism is difficult, remember, because State plan has to map on to capitalist planning. the argument is that LRs leads to a situation where there is less divergence between State preferences and capitalist preferences. in high inequality places, capitalists want luxury goods; not capital goods, infrastructure, etc., which is what the State wants. in short, LR helps the 'principal agent' problem.
2. LR re: rates of growth? yes, important--the first part of the course.

for most developing countries, the size of the domestic market will help ISI be more successful—but it will only expand the constraints, but not eliminate them.

from 1870-1930, agrarian elites 'control' economic policy—export of commodities, etc; not inflationary policies, etc.

In LA, 1930 saw (1) agrarian elites as most powerful class; (2) beginnings of rapid industrialization. this is a puzzle?

for a landed elite, ISI is a kick in the gut—this is a rapid wiping out of the landed class policy. [still not clear why this is the case, necessarily—arithmetically yes, they disappear, but does this mean marginalization? inflationary policies associated with ISI do hurt them]

even if landed elites live on, they live on as junior partners. and they're going to have to increasingly find other ways to be accomodated. a 'passive revolution', war of attrition. gradually undermined.

authoritarianism vs. democracy – conventional argument is that Korea succeeded because it was an authoritarian State, and democracy makes it hard to have a good developmental State. the most plausible version of this argument is that democratic states are subject to competing pressures that make effective planning difficult; a subsidiary argument is that politicians pander, in a democracy, in order to placate constituencies—they therefore dispense rents, rather than act efficiently. in authoritarianism the idea is that you throw capitalists in jail.

this is appealing, at face-value. but let's look at the facts—both France and Japan are democracies, in post-war countries, and pursue successful discipline of capitalists.

what the authoritarian argument takes as implicit is the idea that what you need to discipline is labour (labour of course benefits from democracy). but we're interested in power. remember, capital doesn't rely on the channels associated with a democratic state—it's power over investment remains, whether or not the State is authoritarian. on balance, then, authoritarianism gives you an increase in the power of capital viz-a-viz labour. in this sense, State should have less leverage against capitalism, not more.

on the question of short-term interests, capitalists had to relinquish planning powers to bureaucrats, but never took a hit to profits

competition in ISI was not desired, because that is 'waste' – you don't want scarce resources being squandered, things being overproduced, etc.

nationalization of finance doesn't always have to piss off industrialists, because it helps concentrate investible resources. of course, financiers would have to be weak, and industrialists would have to be sure that this isn't the 'thin wedge' of a nationalization/socialization program.